On Friday, April 22, Bloomberg reported that Japanese Prime
Minister Naoto Kan announced plans for budget supplements targeted
at rebuilding in the wake of the earthquake and tsunami.

If the economic
contentions of statists hold true, costly crises like the one that
has ravaged Japan are a boon, an opportunity for the rebuilding
process to stir economic activity that wouldn't otherwise have taken
place. Instead of an expense of the catastrophe, the almost $50
billion set aside by Japan's state for reconstruction ought to be
greeted, we're told, as an economic shot in the arm.

A Fallacy Writ Large

Economists―at least those who don't buy this line of reasoning―call it the "broken
window fallacy," an allusion to nineteenth century political economist Frederic
Bastiat's famous tale of
the "seen" and the "unseen."

Bastiat's vignette describes a shop owner whose storefront window is shattered
by a rascally son, the result being some unexpected business for the glazier.

While that business, the
contract for a new window, is the "seen," Bastiat draws our attention to what is
"unseen," all of the productive activity that the shop owner could have engaged
in but for the cost of replacing his window.

Under the "devastation as
stimulus" argument, whereby the destruction of valuable resources and
infrastructure is (or can be) beneficial, there's no reliable way of determining
where to draw the line between economically "good" and "bad" misfortunes.

If a cracked window is to
be regarded as a spur for productive activity, are we to regard the earthquake
damage in Japan in the same way? Or is there a point at which the damage is too
extensive to be thought of as advantageous to that indeterminate thing called
"the economy"?

Properly understood,
economic efficiency is a product of a market actor's ability to use resources in
a way that avoids waste and maximizes productive output on her costs. Since each
individual is actually an "economy" unto herself, allocating time and scarce
resources to achieve particular ends, even a comparatively small harm like a
broken window can't ever result in a net gain for the community.

To resort to tautology,
costs are costs, and while they can be shifted from one place to another, their
creation through natural disasters and the like simply occasions expenditures
that wouldn't have otherwise been necessary.

"To resort to tautology,
costs are costs, and while they can be shifted from one place to another, their
creation through natural disasters and the like simply occasions expenditures
that wouldn't have otherwise been necessary."

Something from Nothing

Were it possible to extract something of positive value from
thin air, or from, for example, the destruction of
buildings, economic issues―which result from scarcity―would
disappear altogether. Whenever the economy needed a new
lease on life, we could go ahead and call in the demolition
team, because after all, the builders will be ready to hit
the ground running when the wrecking ball has done its part.

The truth is that some
people do stand to benefit in the wake of disasters that
elicit huge government spending projects, but that benefit
doesn't exist in a vacuum. Where the economic system is
defined by the coercive interventions of the state, public
works projects that follow natural disasters mean contracts
for the state's favourites, at the cost of the working
masses.

The state and its
courtiers, groups that can't actually be distinguished in
practice, happily exploit tragedy to redirect wealth; they
certainly enjoy a boost, but it isn't somehow free of
charge.

Working people pay the
price, and the price is significantly higher than it would
be in a society where the details of the rebuilding process
were determined by the voluntary decisions of free people.

In such a society, the
new costs brought about by a given disaster would be born in
proportion to the individual investments that had been made
beforehand, not thrust upon workers who had no stake in the
infrastructure to begin with.

Statist Sleight of Hand

Market anarchists refuse to treat the state as a
supernatural entity capable of acting outside of and against
economic laws. Where the state expends wealth, it doesn't
erase the costs that attend disasters. In fact, the
inefficient and self-serving nature of the venal
relationships created by power themselves foist further
costs upon productive society.

It was easy enough for
the shop owner to see the illogic in the broken window
fallacy. Japan's citizens shouldn't be taken in by the
state's attempts to exploit their current disaster. Rather
than allowing the state the chance to arrogate more power to
its circle of plutocrats, the Japanese people ought to
retain the skeptical instinct they feel when the state
starts talking about "opportunities for growth."